THE PESO may move sideways against the dollar this week as market participants will likely flock to safer currencies amid heightened global trade tension.
On Friday, the peso strengthened to close the week at P52.16 versus the greenback from P52.19 the previous day, driven by the decision of global debt watcher Fitch Ratings to affirm its ratings on the Philippines.
Week on week, the peso was flat from its P52.16-per-dollar finish on May 24.
“The dollar is expected to move sideways with an upward bias this week due to safe-haven buying amid escalating global trade tension and likely softer economic data from China and the Eurozone,” a market analyst said in an e-mail on Sunday.
The analyst added that the peso will likely decline versus the greenback on Monday following the recent threat of US President Donald J. Trump to hit Mexico with tariffs to stop illegal immigration from the southern border.
In a tweet on Friday, Mr. Trump said a five percent tariff will be imposed on all Mexican goods starting June 10, which will be gradually increased until the “illegal immigration problem is remedied.”
“This unwanted development might prompt investors to hold on to the safe greenback,” the market watcher said, adding that the possible stagnation in China’s manufacturing sector in May 2019 could also trigger safe haven buying.
However, Rizal Commercial Banking Corp. economist Michael L. Ricafort said the peso is seen to strengthen versus the dollar, as the decline of US Treasury bond yields to 20-month lows could support the local unit which has “much higher interest rate returns.” He added that the peso will likely climb as global crude oil prices declined to new 3.5-month lows.
Towards the end of the week, the market analyst said the greenback will likely continue its sideways movement amid mixed economic data from the US — which may fuel monetary policy easing bets — and possibly softer reports from China and the Eurozone.
On Thursday, US Federal Reserve Vice Chairman Richard Clarida said the US central bank could change its position if inflation stays too low or if global economic developments threaten its outlook.
For this week, Mr. Ricafort expects the peso to trade between P51.80 and P52.20, while the market analyst gave a P52-P52.60 range. — Karl Angelo N. Vidal